It is
the purpose of this study to suggest that the expansion of the individual's
right to successfully sustain a law suit at the expense of the employer's
ability to make basic business decisions has gone too far, thereby limiting to a
far-too-great extent the ability of the free market to function fairly and
effectively in the distribution of resources and opportunities. The ability of
the employer to determine what he produces and how he runs his workplace has
been limited too severely by a concerted judicial effort to provide court access
and remedies to employees in the workplace and as consumers. As a result, we as
a collective society have been harmed. Our collective ability to choose the best
and most creative products, to choose the most challenging and promising jobs,
to take advantage of workplace and marketplace incentives, to make tile most of
the resources
society makes available to us, has been severely constrained. The growth of
litigation is destroying the free market, and consequently our freedom of
choice.

Litigation is exploding in our society, both in terms of the number of cases
being filed and the substantive costs associated with litigation (such as
settlement costs, damage awards, attorneys fees, etc.) For example, the federal
courts have seen an amazing increase in civil litigation. While criminal case
filing have remained relatively stable since 1970 (39,959 were filed in the
12-month period ending June 30, 1970, while 41,490 were filed in the same
12-month period ending June 30, 1986), the number of civil case filings has
absolutely mushroomed. Using the same periods ending each June 30, the number of
civil cases filed in U.S. District Courts in 1970 were 87,321. By 1980, this
number had grown to 168,789. In 1986, the number had grown to 254,828 (a
staggering 192% increase in case filings compared to 1970).
[1]

Private party litigation in the federal courts increased by 57,837 case filings
per year in just the six-year period from 1980 to 1986. Within that period,
contract cases went from 24,989 to 40,095; personal injury cases went from 21,505 to 32,741; labor
cases went from 6,399 to 11,600; civil rights cases went from 11,485 to 17,872.
The reasons for this increase are complex and varied, but the sheer size of the
increase gives credence to the claim that there is a "litigation explosion" in
contemporary American society.

Similar results are being found at the state level. A study comparing the 1976
and 1985 annual reports of the Judicial Council of California revealed that the
number of personal injury, death and property damage lawsuits filed in
California between 1974 and 1984 increased 55.3% while the population of the
state increased only 21%.
[2] According to a 1986 Time report, the number
of civil lawsuits in state courts grew four times as fast as the American
population from 1977 to 1981.
[3] In 1984 there was one private lawsuit for every
15 Americans, with 16.6 million private civil suits filed in state courts.
[4]

It
should come as no surprise that this "litigation explosion" has been accompanied
by a dramatic surge in the number of practicing lawyers. As of December of 1988,
the American Bar Association estimates that there were 713,456 active practicing
attorneys in the United States, compared to 326,842 in 1970 and 574,810 in 1980.
Since 1950, the number of lawyers has increased at a rate twice as fast as the
nation's population. Since 1970, that increase has been at a rate more than six
times as fast. Approximately 35,000 new lawyers now enter the profession every
year. Lawyers seem to be everywhere, with approximately one lawyer for every 350
Americans. Ofthese practicing attorneys, the number of trial lawyers engaged in
litigation appears to be increasing with particular rapidity, if membership in
the Association of Trial Lawyers of America is any indication. Since 1970,
membership in that organization has more than tripled.
[5]

In
1986 and 1987, a group of senior federal executive branch officials representing
eleven federal agencies, including seven serving as chief legal officers for
their agency, (Working Group) issued two reports on insurance availability which
exposed the tremendous increase in tort litigation.
[6] The Working Group found
the role of tort law central to the crisis in insurance availability, citing the
shift toward liability without fault, the undermining of traditional concepts of
causation, explosive growth in damage awards, and excessive transaction costs.
The group seemed to run out of superlatives, citing the "extraordinary growth in
damage awards", the "massive increase" in tort lawsuits outside the automobile
accident area, and the increase in "immense punitive damages awards".

A
look at some of the specifics reveals trends which are indeed shocking. Here is
litigation which does not grow incrementally, but exponentially. The Institute
for Civil Justice (Institute) released a study in 1987 summarizing civil jury
verdicts over a 25-year period in two jurisdictions, Cook County, Illinois, and
San Francisco, California.
[7] The Institute found that the average personal
injury jury award (in inflation adjusted dollars) increased in Cook County from
$59,000 in 1960-64 to $187,000 in 1980-84 (an increase of 217%). The increase in
San Francisco was 358%, going from $64,000 to $302,000. The rate of increase was
most dramatic in the 1980's. Within a mere 5 years, the average personal injury
award increased by $57,000 in Cook County and by $169,000 in San Francisco.

Simultaneously with the increase in jury awards, the Institute found increases
in the number of cases where plaintiffs prevailed with juries. Focusing on
product liability and medical malpractice, the analysis revealed that for
products in Cook County and for both in San Francisco, plaintiffs doubled the
percentage of tried cases in which they prevailed (from approximately
one-quarter in 1960-64 to one-half in 1980-84).

One
of the most valuable calculations made by the Institute was to show the increase
in "expected jury awards" (the average jury award multiplied by plaintiff's
likelihood of success). This is the calculation which most effectively shows the
trend of rapidly increasing jury awards and its potential cost and behavioral
impact on defendants. Using inflation-adjusted dollars, the expected award for
personal injury jury verdicts increased from $28,000 to $114,000 in Cook County
(an increase of 307%) and from $33,000 to $181,000 in San Francisco (an increase
of 448%). Again, the most dramatic portion of this increase was in the early
1980's, with the increase being double or triple the entire increase in the
previous twenty years.

The
substantial increase in the size of awards has been compounded by the growing
willingness of juries to award punitive damages. The original Institute analysis
and a follow-up study
[8] show a dramatic increase in the size of punitive
damages. The Cook County average punitive award in a personal injury lawsuit
went from $28,000 in 1970-74 to $1,934,000 in 1980-84. The number of Cook County
punitive awards increased from 3 in 1960-64 to 75 in 1980-84, while San
Francisco punitive awards in the corresponding period went from 14 to 51. In San
Francisco, almost one out of every seven plaintiffs' verdicts in the 1980-84
period included a punitive damage award.

The
willingness of juries to award spectacularly large damages to plaintiffs,
primarily through non-economic and punitive awards, creates an uncertainty that
makes the settlement of cases that much more expensive. Nearly 92% of all cases
filed in the legal system settle prior to verdict
[9] and the dramatic increase
in average jury awards naturally has a corresponding impact on the settlement
value of cases. As the Working Group noted, "settlements by their very nature
reflect the range of verdicts available to tile plaintiffs. Thus, as jury
verdicts skyrocket, so do settlements." The Working Group concludes that the
most accurate measure of the rate of increase of settlements probably is
provided by the expected jury award, which as indicated previously, is climbing
at percentage rates in the hundreds.

The
numbers associated with litigation growth are almost too large to comprehend.
All sense of proportion and balance between loss and award seems to have been
lost. If one looks at just one particular defendant (in this case, the largest
of them all – the United States Government), the sheer magnitude of the problem
is sobering. According to the report of the Working Group, on October 1, 1985,
the Torts Branch of the U.S. Department of Justice (which handles all civil
actions filed against the government) was defending 11,000 lawsuits seeking a
total of $200 billion in damages.

What
are the direct economic costs of this litigiousness? A 1986 report by the
Institute for Civil Justice
[10] indicates that total expenditure nationwide for
tort litigation in 1985 was between $29 billion and $36 billion. This figure
includes compensation paid to plaintiffs, legal fees and related expenses,
insurance company claims processing costs, value of litigants' time spent in
litigation, and court operating costs, for the approximately 866,000 tort
lawsuits terminated in state and federal courts of general jurisdiction in 1985.
Of this amount a remarkable $16 billion to $19 billion was spent on the
non-compensation costs of the tort litigation system – this in order to produce
$14 billion to $16 billion in net compensation. Taking out non-litigant
expenses, plaintiffs received only approximately 56% in net compensation. The
percentage goes down to 43% if you exclude auto torts. In short, only about half
the costs that go into tile litigation system are actually used to compensate
the injured party.

One
should note in particular the costs of the courtroom incurred by defendants. In
1985, defendants' legal fees and related expenses ranged from $4.7 billion to
$5.7 billion. The average tort lawsuit resulted in an estimated $5,400 to $6,600
in legal fees and related expenses. Such figures are important in analyzing tile
behavioral impact of litigation on businesses, since such casts must be avoided
by either avoiding the lawsuit entirely or by settling the lawsuit as soon as
possible, before the legal fees and expenses can accumulate to a value greater
than the settlement amount.

What
do these figures reveal? Why assault the reader with so many statistics? The
answer in part lies in the demands that supporters of the current litigation
system have made on critics. These supporters insist that anecdotal evidence –
the singular case with a particularly large damage award, the establishment of a
new cause of action under particularly grievous case facts, the application of
non-economic or punitive awards to a deep-pocket defendant with minimal fault –
is insufficient to demonstrate a change in the nature of the litigation system.
These supporters demand "facts" (i.e., statistics) demonstrating patterns of
substantial change. However much the statistical research into contemporary
litigation may be in its infancy, the figures already solidly confirm what
concerned legal scholars and businessmen have been saying about the "litigation
explosion". Statistics also avoid the charge that the "litigation crisis" is a
mere fabrication by the insurance industry, or (even more devilishly, the result
of an international insurance industry conspiracy), since they look directly at
the litigation experience, and not the indirect costs charged by insurance
companies for such experience. The crisis in litigation, with explosive growth
in case filings, plaintiff verdicts. jury damage awards, and settlement values,
is very real.